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Question 8 (1 point) On July 1st, a company exchanges an account receivable from a customer with a $100,000 note receivable due in 3 years with a 12% annual interest rate. The customer repays the loan and the accrued interest at the end of the three years. Assume that interest is not compounding from period to period. On receipt of cash from the customer, who pays the principal and all of the interest owed to the company, among other items the company records a... credit to interest receivable debit to accounts receivable debit to interest income debit to note receivable

Answer 1

Answer 8 -

Journal entry to record receipt of interest and principal on note Receivable-

Cash/bank Debit

Notes Receivable credit

Interest Receivable/ interest income

Since, cash is a asset account and when amount is received, it is debited and note Receivable is also an asset but it is exhausted when debtor pays all the amount due, so it is credited. Interst Receivable is also an asset account, but when payment of interest is made ,the account is reversed and credited.

Therefore, the correct answer is option 1st, credit to interest Receivable

Answer 9 -

Accounts Receivable turnover ratio indicates that how many times the collection of average Receivablesis made by the entity. High accounts Receivable turnover ratio indicates that firm collects average Receivable quickly.

Firm B's ratio is less than Firm A's ratio. Hence, firm B takes longer to collect cash from customers.

Therefore, the correct answer is Firm B.

Answer 10 -

Under ageing of Receivable method, journal entry to record allowance for doubtful accounts at the end of period is -

Bad debt expense Debit

Allowance for doubtful accounts.

Allowance for doubtful accounts is credited.

Therefore, the correct answer is True.